What is general insurance.

Hey guys, welcome to in this blog we would be covering the topic general insurance where we would be learning about peril and hazard the risk and loss principles of insurance. As well as types of insurance.

What is general insurance.

So let's move forward with the blog before starting to understand the principles and types of insurance we must be aware about some of the basic terminologies which is related to insurance.

What exactly insurances ?

So, what exactly insurances, it is method of transferring the risk of financial losses from one entity to another in exchange of premium. so whenever as an individual you are taking insurance from the insurance company you would be paying some amount of premium to to the insurance company.

Now, this premium is the charge which you the insurance company is charging you because they would be providing you the coverage for any kind of uncertain loss that could happen in the future. So for example, if you have taken car insurance and if any damage happens to your car as per the terms and conditions of the policy.

The insurance company would be providing you the coverage amount to cover the loss that has been the loss or damage that has been to your car value whereas in exchange you would be paying the premium for a certain period of time to get that to your coverage.

Now who is an insurer, so the company selling the insurance is referred as insurer in short the person or entity whose risk is covered through insurance is referred as insured. so when you are taking insurance from insurance company you are the insured and the insurance company is insurer.

What is Premium ?

We already talked about it, it is the charge for a certain amount of coverage which you are taking policy, it is written contract or certificate of insurance. so whenever you are provided with insurance policy which mentions the terms and conditions. It is forming a kind of contract between you and the insurance company.

So it is a certificate of insurance which is a proof of terms and conditions related which would be fulfilled to the contract to be legal, in case those terms and conditions are not fulfilled those contract can also be considered as void or illegal risk uncertainty of future or deviation from expected outcome resulting into losses. So why is anyone taking insurance the basic factor is the risk, so a risk is referring to uncertainty of future you whenever you are purchasing your own house.

now you are not sure that your house would be remaining in the same condition. In any case, if any natural calamity occurs and there is a lot of damage to your new built house, the property, so there is a kind of risk related. now you are taking the coverage the house insurance, the home insurance to safeguard that risk in case of any damage or property loss the coverage amount which would be provided to you would not depend on the premium which you have provided.

So the premium is very low, however the coverage amount would be to solve your damaged amount. so if the damage losses is very high, the coverage would be provided the coverage amount would also be high irrespective of how much premium you have paid there till then.

What is Peril Fairness cause of a Risk and Losses ?

So for example natural disaster, now natural disaster is a cause of a risk because when it comes any kind of floods or cyclones there is a lot of damage to the property as well as the human life. So that is a cause of risk, so any cause of a risk would be referred as parent. now hazard hazardous condition that increases the frequency or severity of loss cause of risk was referred as peril.

However, whatever increases the severity of loss that would be referred as hazard. so for example when the natural disaster came that was peril but however the open electric wires which could increase the severity of loss which could increase the damages that would be referred as hazard.

What are the requirements insurable risk ?

Now let's move on to what are the requirements insurable risk. So not all kind of this could be insured what what wrist has to be insured, so it should be pure risk now pure risk means that there should be chances of loss or no loss there should be no scope for profit. so insurance companies would be covering your loss amount and would not be providing you any kind of profit second is accidental and unintentional.

so to get an insurance it's very important that the risk or the loss should be or the loss in any Sheena in any scenario should be accidental and unintentional. so it can't happen that intentionally you are damaging your vehicle and you are claiming the insurance amount for your vehicle insurance. so the requirement is that it should be unintentional and it should be accidental.

so the risk and the loss amount should not be specified should not be certain it need to be uncertain feasible premium insurance companies come come up with the policies only those policies where they could provide feasible premium. so that makes it very important that the need for that particular insurance. for example fire insurance, home insurance, the life insurance, these are the insurance for Whiston need of for which there is need of large customer a large customers large set of people having the same need having the same risk of losses they which is which

is there in their day-to-day life and for this reason the insurance company could provide feasible premium which is a very low amount as compared to the coverage amount which the insurance companies provides in case of any loss thus to make the premium feasible it becomes important that the need should serve large set of customers large number of exposure units so this already I have

mentioned that there to any insurance policy to come in the market it's very important that there is need of large number of people all are else that insurance would lie insignificant and the insurance companies could earn nothing by it so it's very necessary that there is a need of that particular insurance by a large set of people now it should be measurable so measurable defines your

the loss amount that has to be measured by the insurance company before providing you any coverage so for example you have taken insurance or your home insurance and any damages happen to your property now the it's not that you would be claiming any answer unspecified any is short of amount and the insurance company would be paying you that it's that the insurance company would come they

would in the insurance sorry the insurer the agents would come they would investigate your property and they would they would try to analyze how much should be the loss amount and what coverage should be provided accordingly so it's not that whatever you asked for would be provided by you it would be provided to you it is the it is on the basis of the measured loss amount the coverage

amount which would be provided no high probability of loss so it's also very important because the whole insurance business runs on probability of loss so if there would be high probability of loss the insurance companies would be running in losses itself because the chances of them paying the coverage amount and you getting secured would be higher so here the chance there should not be

significant so they would they won't be providing you insurance if there would be high probability of loss so for example if you are going through a critical illness you are going through cancer and you are asking for health insurance they may not be providing you the insurance the health insurance because they know that the chances of you dying is very high and thus if they would be providing the

coverage amount they would be providing for it would be very high in compared to the premium which you have to pay so the chances of chances of loss should not be very certain should not be very high insurance a subject matter of cetacean now this lines forms the basics of insurance which says that it has the insurance has to be asked or requested and it it is not meant to be sold as any financial product

so the customer should ask for insurance because it is their need to cover their risk in day-to-day life and the agents the insurance agents would be guiding the guiding by suggesting them the insurance policy as per their need but it is not something to be sold in the market it is to be asked by the customers.

Principles of insurance.

Now coming to principles of insurance, principles of insurance guides out the norms to be followed for existence of contract between the insurer and the insured in absence of which the insurance contract could be void. so principles are the same principles of insurance are setting out the norms the rules that should be bitte that should be there in any insurance contract.

In case if it's not there those insurance contract could be called void or that could be nullified. so insurance contract could be to be legal it should be according to these principles which are set out.

so let's see first is principle of indemnity second principle of insurable interest third principle of utmost good faith fourth principle of contribution fifth principle of subrogation six this principle of average and seventh is principle of proximate cause so one by one we would be learning about all these principles let's move

Principle of Indemnity.

forward and look after principle of indemnity it states that the insurer will compensate only the loss amount and not provide any sort of profit so as I when I was talking about the pure risk term I already mentioned that the insurance companies would be provided only for your loss amount and will not be guaranteeing you any kind of profit so the the pure insurance policies which are providing you which

are providing you coverage for losses that is on the basis of principles of indemnity it also ensures that to provide guarantee Caprice that would be enough to put the insured back to the financial position prior to loss so if you have taken insurance of certain property or something if there is any shot of loss as per the terms and conditions mentioned in the policy it would be providing you the pub coverage - to

cover all those losses and put you back in your financial position as you were prior but it won't provide you any sort of profit so for example the term covers the term covers which are provided as life insurance policy they are pure insurance because they would be providing the insurance coverage on sort of loss of life and they won't be providing any kind of profit whereas when we talk about the

insurance policy these days very famous which is you lip that is unit length insurance plan that is not a pure insurance policy because it invests some of the amount in the stock market and there they start to provide you a little bit of profit along with the insurance coverage so your dress coverage over there reduces they are not providing you the full risk coverage because they are providing you some sort of

profit by investing in the market as well so that was not according to principle of indemnity so an insurance to be a pure insurance cover it has to be followed under the principle of indemnity.

Principle of Insurable Interest.

Second is principle of insurable interest now this principle states that the insured must hold significant interest in the subject matter of insurance ie they should be the owner it should be evidence that the insured is

interested in preservation of thing life or health in short and would suffer loss in case of damage so principle of insurable interest is just to trying to explain you that when you are taking insurance of something make sure that you are holding interest in that particular subject matter of insurance so anything your life or health insurance you should be the owner you should be the one who would be

suffering the loss in case of any damage so this is simply the principle of insurable interest because if you were if there won't be any kind of interest for which you are taking the insurance it won't serve the insurance purpose.

Principle of Utmost Good Faith.

Third is principle of utmost good faith now according to this principle both the parties that is both the insurance company as well as the individual asking for insurance that is

insured the insurance contract must disclose all fact material to the risk voluntarily to each other so whenever both the parties are coming into this insurance contract they Martin they must disclose all fact materials to the risk so the insurance companies when they provide you the policies with the terms and conditions they asked you to read all those things this is because they are disclosing all the material

facts and you need to be and you need to study all those things to get a relevant idea about what exactly are the terms and conditions and when you are eligible to get the coverage amount however when you are when you are asking for any insurance it is equally important that you specify all the details about that particular thing for which you are taking insurance or else it would it it would be or else it would

be something you are hiding it won't serve the insurance contract and it can be void so for example when you are taking health insurance it's very important that you give the insurance company your health report which would be mentioning here which would be mentioning all your details and and any kind of busy specific diseases should not be hidden which would be serving that that particular loss purpose.

Principle of Contribution.

now coming to principle of contribution this principle is implemented when multiple insurance policies are covering the same property then in case of loss coverage is provided proportionally by all insurance companies so it's not important that you are taking the whole coverage amount from a single insurance company many a time it happens that for the same property for any

particular vehicle or any particular home you are taking insurance from multiple insurance companies what would happen in case there will be damage to that particular property so here then the principle of contribution would come into picture which to which would see that the coverage amount would be provided you proportionally by all the insurance companies so whatever whatever coverage you have

taken from particular in insurance companies the the cover for the loss would be provided in the same proportion v this principle of average this principle is applicable in case of under insurance where the payout against a claim will be in same proportion as the value of under insurance it is also known as proportionate settlement so for example if you have taken insurance of whom but you the insurance

company suggested you to take the as per as per the details and whatever the maximum loss amount could be in case of damage to your home the insurance company suggested you some amount to be taken as coverage but you have not taken the full coverage view of insurance you have taken a lower coverage and you and you try to serve the rest by on your on your own so that would be proportionate

settlement because you have not taken the full coverage amount so in case there would be any damage to your property and the coverage would be very high but that won't be served by the insurance company it would be in the same proportion as the value of underinsured is because they had already mentioned you that you are taking and under insurance policy here you won't be paying the same premium as as in the other policy related.

Principle of Subrogation.

next is principle of subrogation as per this principle after the insured is compensated for the loss due to damage to property insured then the right of ownership of such property passes on to the insurer so if there is total loss to your property let's take an example of vehicle only which you are owning if there is total loss to your vehicle and you have taken insurer and

you have taken your insurance coverage for that loss which has provided you with the full amount to be to get to get the new vehicle now after that you won't be having the ownership on on that particular vehicle that ownership would be passed on to the insurer because they have provided you the coverage amount which is actually covering the cost of your vehicle so in this case the principle of subrogation would apply.

Principle of Proximate cause.

Then the principle of proximate cause in series of even fare loss has incurred due to more than one cause in succession. The proximate or nearest cause is identified and if that causes insured against insurance companies bound to pay and vice-versa.

So what happens that many times it happens that when you are incurring a loss that's not due to a particular cause there may be many causes due to which a particular damage occurred. In that case the insurance company would try to find out the nearest cause, the main cause which you because of which the damage happened and if that cause is insured in as particular,

as for the terms and conditions, then the coverage amount would be provided but if that cause is not insured according to insure the policy then the insurance company won't be bound to pay you.

Now coming to types of insurance. so insurances basically we can divide it as life insurance and non-life insurance which is also referred as general insurance so in this general insurance module we would be covering various topics like fire insurance health insurance motor insurance and marine insurance.

So in my next blog I would be telling in detail about these types of insurance and we would be covering all the general insurance parts thank you.